NFL DEALS STRIP NETWORKS OF IN-GAME SPONSOR SLOTS

Having pried a record $17.6 billion in rights fees from ABC, CBS, ESPN and Fox, the National Football League is also taking a key revenue-generating sponsorship opportunity away from those TV networks.

The league's new TV deals bar the networks from selling so-called in-game enhancements -- sponsored programming segments such as Fox's "Red Lobster Catch of the Day."

The deals still allow networks to sell title sponsorships of their pre-game, post-game and halftime shows. Also the networks will each be allowed to sell three additional 30-second ad units per game. But those units were effectively offered as compensation for the lost sponsorships rather than as an added revenue opportunity the networks could use to help recoup their eye-popping NFL investments.

FOR THE VIEWERS

Val Pinchback, the NFL's senior VP-broadcasting, said the in-game enhancements were eliminated to bolster viewer enjoyment

of the games. He didn't deny NFL sponsors such as Coca-Cola Co., McDonald's Corp. and Sprint Corp. have complained that competitors were able to use such programs to tie into pro football, diminishing the value of their sponsor rights.

"We sampled a few agency types and asked them what kind of hit would it be on the ad community if we took [in-game enhancements] away," said Mr. Pinchback. "They said, `As long as it's a level playing field, it's OK.' We went back to the networks and there was little demurring."

The NFL gets the highest sponsor fees of any pro sports league. Sprint pays $24 million a year, for example, while Coca-Cola is finalizing a renewal deal likely to come in at $25 million to $30 million annually, establishing a new benchmark in pro sports sponsorship.

CREATING A PROBLEM

In easing sponsors' worries, however, some media buyers believe the league has created a problem for its TV partners. Without enhancements, advertisers are like to balk at significant ad rate increases on NFL games.

"By taking away the in-game features available to advertisers, the networks have lost a key selling tool, especially for marketers interested in multiple-unit deals," said Bob Brennan, president of Starcom Media Services, a division of Leo Burnett Co.

However, Jeffrey Mahl, senior VP-ad sales for ESPN, said, "Since this is the same for everyone selling the NFL, I don't believe it will have a big effect. It's a level playing field."

With the NFL reaping unprecedented rights fees, sports marketing experts believe the league must find ways to offer additional value to networks and sponsors.

"The league will work more closely with the networks . . . jointly delivering added value to sponsors and driving sponsors to the networks," said Gary Jacobus, senior VP-corporate representation for International Management Group.

ABC and ESPN should be able to bring advertisers added-value to their deals by packaging "Monday Night Football" and the ESPN games, and also including sponsorship opportunities in other ESPN properties.

Mr. Mahl said ESPN and ABC will work "very closely" in selling the games.

CAN THEY MAKE MONEY?

Whether ABC, CBS, Fox and ESPN can make money on their deals remains a question. For the next eight years, ABC will pay $550 million a year, CBS $500 million, Fox $550 million and ESPN $600 million.

Jessica Reif, a media analyst at Merrill Lynch & Co., said it's hard to make money on these deals, and added she expects CBS, for example, to lose $100 million a year on its deal.

However, final figures might depend on how the networks crunch the numbers.

CBS, for instance, expects to get 4 billion impressions a season on the games to promote other CBS programs. If the entertainment division is billed for the spots, that could add $50 million to $100 million a year to the net's NFL revenues.

The big question is what cost-per-thousand increases the networks will get. In 1994, when the current NFL deals took effect, CPM increases averaged only 6.3%, though the rights fees increased an average of 23%.

MAKING IT WORK

"You can't make an NFL deal pay out on a traditional cost revenue basis," agreed Mike Trager, director of sports TV and marketing company Marquee Group. "CBS factored in the boost its owned-and-operated stations and affiliates would receive. There's also the branding and prestige factors; if you have the NFL, you're perceived as a player."

But for NBC, which will lose football after 33 years, the price was too steep.

Bob Wright, president of NBC, explained his network's rationale for not matching CBS' offer in an internal memo dated Jan. 14: "We understand the value of the NFL and were willing to bid competitively, but the contract we were asked to sign would have resulted in annual losses of between $150 million and $180 million per year."